Archibald, Black & Decker board member in business deal 

Posted: 7:14 pm Tue, March 9, 2010
By Danielle Ulman
Daily Record Business Writer

Three days before a shareholder vote on Black & Decker Corp.’s merger, the company said a private business relationship between its CEO and a board member did not cloud the board member’s independence.

In a Tuesday news release, Black & Decker said it had received inquiries about whether a real estate business partnership between its CEO and chairman, Nolan D. Archibald, and board member M. Anthony Burns affected Burns’ ability to vote without being swayed by the financial impact on Archibald.

Burns was one of three independent directors to sit on the “transaction committee” that was formed to consider the $4.5 billion all-stock merger offer from The Stanley Works that could net Archibald $45 million for “cost synergies.”

“Mr. Burns has informed Black & Decker that his private business relationship with Mr. Archibald did not affect his evaluation of the Stanley transaction,” according to the release.

But Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said outside business relationships violate the spirit of corporate governance rules.

“Someone independent from management means an absence of financial connection to management,” he said. “I think that relationship would have made it prudent for that individual to not be on that committee, in my view.”

Archibald and Burns have been co-owners of Red Ledges, an exclusive golf club being developed just outside Park City, Utah, with a Jack Nicklaus Signature Course, an equestrian center, tennis school and spa, since 2005. Cottages start at $900,000.

Douglas Schmidt, CEO and managing director of Bethesda financial services firm Chessiecap Inc., first uncovered the connection.

Archibald and Burns disclosed their side business to Black & Decker’s counsel when the relationship began, and the company said the business relationship would not affect Burns’ independence as a board member, based on its corporate governance policies and New York Stock Exchange rules.

According to NYSE, board directors are not considered independent unless the board determines there is no material relationship between the person and the company. However, NYSE goes on to say that it would be impossible to anticipate every relationship that might occur and cause conflicts of interest.

“In particular, when assessing the materiality of a director’s relationship with the company, the board should consider the issue not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation,” NYSE rules say.

From a corporate governance standpoint, Elson said it is appropriate to question the relationship.

“This is a classic relationship that affects independence of a board member,” he said.

Black & Decker’s shareholders will get their chance to vote on the proposed merger Friday in Dulles, Va. Elson said the relationship should be of concern to investors.

Under the merger, Black & Decker’s headquarters would move to Connecticut, where Stanley is based. John Lundgren, Stanley’s CEO, would lead the new company and Archibald would be executive chairman for three years.